Earnings Call Transcript - LOPE Q1 2021

Operator, Operator

Good day and thank you for standing by. Welcome to the Quarter One 2021 Grand Canyon Education, Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. This call is being recorded. I would now like to turn the conference over to your host Mr. Dan Bachus, Chief Financial Officer. Please go ahead, sir.

Dan Bachus, CFO

Thank you. Joining me on today’s call is our Chairman and CEO, Brian Mueller. Please note that many of our comments today will contain forward-looking statements that involve risks and uncertainties. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. We undertake no obligation to provide updates with regard to the forward-looking statements made during this call, and we recommend all investors review these reports thoroughly before taking a financial position in GCE. And with that, I’ll turn the call over to Brian.

Brian Mueller, CEO

Good afternoon and welcome to Grand Canyon Education’s first quarter fiscal year 2021 conference call. GCE had another successful quarter and the long-term future is very bright. We are experiencing some short-term issues due to the pandemic, which I’ll explain in a minute. However, long-term, we’re building three unique and differentiated platforms that will provide significant and impactful growth. The pandemic has been a serious challenge for universities, and many are experiencing financial difficulties. In addition, many recent college graduates who are new to the job market are having a difficult time. Many have degrees that aren’t serving them well in the current economy. It has been GCE’s goal to create educational models that address the real issues within higher education. I believe those issues continue to be; one, the out-of-control rising cost of university education. From the early 1980s to the late 2010s, the price of college increased eight times the increase in wages. Two, the increasing student debt levels that will seriously hinder graduates as they begin their adult lives. Three, as tuition levels go up, university and college campuses are declining. Four, bachelor’s degrees should not take four to six years to complete. Five, programs and delivery models lack the creativity and flexibility necessary to address critical shortages in some industries. Six, there are inadequate counseling and support services, especially for first-generation students or those studying at a distance. Seven, three-fifths of college graduates would change their majors if they were starting over. Eight, prior to the pandemic, 43% of college graduates were underemployed in their first job, and two-thirds remained in jobs that don’t require college degrees five years later. Grand Canyon Education is a large organization with over 4,600 staff, is in a very strong financial position, and can invest in educational infrastructure to help institutions address some significant opportunities in the employment marketplace. One of our partner institutions now derives 13% of their total revenues from GCE/Orbis healthcare programs and they want to do more. The combination of institutions looking for additional revenue streams and our ability to help them launch programs locally that prepare students for in-demand occupations is creating rapid partnership growth. Let me explain how GCE is in a great position to support the three main pillars or platforms of our business. The first pillar, Grand Canyon University Online, has 91,334 students as of March 31, 2021, and in the quarter just completed, new students grew on a comparable-start basis in the high single digits, while total students grew 7.2% year-over-year. GCU has historically prioritized new program development to help students gain employment and build careers in the modern economy, and has also focused on programs leading to professional licensure, with most of those being at the graduate level. When the pandemic hit last March, we saw an unprecedented surge in new enrollment in the months of April, May, and June. New enrollments continue to grow above our stated objectives in the next nine months, and total enrollments grew above expectations because of very high retention and re-entry rates. We knew the second quarter of this year would be challenging because of the very high comps, but we were also running into three additional challenges. New starts did not meet expectations this April and will not meet expectations in May, mainly because schools, hospitals, and counseling centers haven’t opened up the way we expected them to and our access to the employees hasn’t returned to normal. Additionally, because of higher retention rates, the number of graduates is exceeding our expectations and our re-entry pool is tightening. Twelve months ago, when the pandemic hit and people were sent home, as we said before, there was a surge in new enrollment, as people were looking to do something productive with their time. One year later, as the country is beginning to open up, people are adjusting to the new reality of what returning to work means for them and whether their children will be in school or not. And so, there was some indecision at the end of April, and some students decided not to start. However, we believe that we will begin to rebound in the third and fourth quarters as schools reopen and as hospitals, counseling centers, and businesses resume more normal operations. The miss in enrollment at the end of the second quarter will be mostly at the graduate level. We haven’t pivoted to recruiting more adult undergraduate students in the short-term, because GCU’s high-quality student body produces very good metrics, including high graduation rates, low cohort default rates, 72% on a 90%-10% basis, and low student debt amounts compared to state and private universities. We consider this enrollment challenge to be short-term only. We are already seeing things begin to open up in May, and we don’t want to change a very successful 13-year strategy as a result. The second pillar or platform to our business is the GCU traditional campus. As many of you know, we began the fall semester with 22,363 ground campus students, of whom approximately 5,000 traditional campus students stayed at home and took their classes online. In the spring 2021 semester, we started with 19,721 ground campus students, of whom approximately 35,100 traditional campus students also stayed home and took their classes online. This resulted in approximately 3,000 fewer students paying room, board, and other fees related to being an on-campus student. However, this was partially offset because GCU actually had an increase of 11.5% in ground traditional students, excluding professional studies. GCU recently put out a message stating that the campus intends to be fully operational in a traditional manner in the fall semester of the 2021-2022 academic year. We are still positioned to meet our established enrollment goals. GCU’s traditional campus is in a very strong position and is becoming a bigger part of our strategy every day. GCU’s goal is now to have 40,000 students on its traditional campus in West Phoenix. The pandemic has made it abundantly clear that 18-year-old students desire to have a campus experience as much now as they ever have; it just needs to be affordable. The combination of GCU and GCE in building out the traditional campus has many strategic advantages. One, Phoenix is a destination city, and Arizona is a destination state. Two, GCU has invested $1.5 billion in educational infrastructure, and the campus is currently ranked 19th in the country. GCU has a great reputation; number three, GCU has a great tuition model, and their students take out less debt than the average state university student. Additionally, the Wall Street Journal recently released average parent plus debt amounts. GCU parents take out approximately 50% of the debt amount taken out by the three heavily subsidized state universities in Arizona. Four, GCU now has nine colleges, offering over 209 academic programs, emphases, and certificates. Five, GCU is adding more than 20 new programs per year targeting growing occupational areas. Six, the university will invest an additional $500 million in the next four years. What’s the plan to grow its campus to accommodate 40,000 students? The university is in a strong financial position following its split from GCE to become a non-profit institution. It is financing all its current capital expenditures and has $325 million in cash as of March 31, 2021. Those who predicted the transaction would produce financial ruin for the university were very, very wrong. Seven, GCE has almost 200 people involved in the recruiting process. Eight, GCE has a state-of-the-art marketing and advertising agency to develop efficient and productive campaigns. Nine, GCE has invested heavily in building out virtual tours of campus and live classroom demos to expose current high school students to GCU during the pandemic when travel is limited. And ten, GCU’s Christian and free-market positioning makes it attractive to a large national audience with very few affordable, scalable options. The third pillar or platform of the business is Grand Canyon Education/Orbis. Our goal is to continue the rapid expansion of partners, some of which want to provide both healthcare and non-healthcare programs. GCE acquired Orbis 26 months ago. Since that time, we have expanded to 26 partners. We opened eight new off-campus classrooms and laboratory sites in the past nine months, partially offset by the planned non-renewal of the contract with a university partner with two sites in the first quarter of 2021, resulting in an increase of these sites to 29 as compared to 23 at March 31, 2020. We have signed a contract with a new partner in the Southern California market, and we are close to signing a contract with a new partner in the New York City market. We will open medical lab science programs with two new partners in the fall. We are working very hard at a number of locations in the west to implement GCU’s nursing and other healthcare programs. The goal is to have over 40 locations by the end of 2022, 50 locations by the end of 2023, and eventually to grow to 80 locations. This is a huge national platform to enroll students and produce graduates. GCE not only has the largest partner in the OPM space but GCU is also rapidly adding partners. This is happening because first, many quality universities are experiencing financial stress and looking for options to increase their revenues. Second, there are important healthcare and other technology careers that are experiencing serious shortages. Third, universities don’t have the resources to scale many of those programs. Fourth, GCE has the capital and know-how to scale those programs and create opportunities for thousands of underemployed young adults while helping universities create important additional revenue streams. Most locations start with the ABSN program, but most have the ability and desire to scale up to as many as ten additional programs. Sites will eventually accommodate between 250 to 1,000 students in multiple programs. Programs will cost between $30,000 and $60,000, take between 12 months and 24 months, and lead to jobs paying between $50,000 and $100,000. Most of the students in those programs will have already completed a bachelor’s degree but consider themselves underemployed. GCU will fill many of the sites in the west and will continue to expand into additional healthcare and non-healthcare academic areas. GCE is pleased to announce that it has signed an agreement with Harding University, which will include multiple Orbis sites as well as a fully developed model for some of their master’s degree programs. This is the first comprehensive contract and may be replicated once it becomes successful. Grand Canyon Education has three large, well-financed, highly professional platforms to grow within the next five years. Each platform is addressing real needs in the market and producing high-quality outcomes for our partners and the economy. I have never been more excited about the future of GCE. In the previous conference call, I outlined the GCE and GCU five-point plan designed to transform an inner-city neighborhood. We are very proud of the ongoing efforts that are producing real results. In addition, GCU/GCE recently opened a vaccination center on campus to serve our neighborhood. That center provided a total of 116,000 vaccinations in a 12-week timeframe. That very important work was provided by 4,380 volunteers who worked 31,463 volunteer hours, resulting in no cost to the taxpayer. The project was assisted by partnerships with Chicanos Por La Causa, and our local Mexican embassy, and provided a much-needed service to a very vulnerable population. With that, I would like to turn it over to Dan Bachus, our CFO, to give a little more color on our 2021 first quarter, discuss changes in the income statement, balance sheet and other items, as well as to provide 2021 guidance.

Dan Bachus, CFO

Thanks, Brian. Included in our Form 8-K filed with the SEC, we have included non-GAAP net income and non-GAAP diluted income per share for the three months ended March 31, 2021 and 2020. The non-GAAP amounts exclude the tax-affected amount of the amortization of intangible assets. The amortizable intangible assets acquired in the Orbis acquisition total $210.3 million, and amortization expense in the first quarter of 2021 and 2020 was $2.1 million. We believe the non-GAAP financial information allows investors to develop a more meaningful understanding of the company’s performance over time. As adjusted, non-GAAP diluted income per share for the three months ended March 31, 2021, 2020 is $1.72 and $1.53 respectively. Service revenue exceeded our expectations in the first quarter of 2021, primarily due to higher than expected revenue per student because of higher ancillary revenues than anticipated and strong retention at GCU, which increased our average daily revenue per student. As expected, revenue per student declined year-over-year, primarily due to approximately 3,500 of GCU’s traditional campus students selecting to attend the spring semester entirely online due to COVID-19 concerns. As a result, spring semester fees, room and board, and other ancillary revenues for the first quarter of 2021 at GCU were lower than in the comparable period in the prior year, which reduced the service revenue we earned. This is partially offset by our revenue growing faster at our other university partners than at GCU. Generally, we generate a higher revenue per student on those service agreements than our service agreement with GCU, as these agreements typically provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU, and the majority of their students take, on average, more credits per semester as they are in accelerated programs. As Brian mentioned, new online enrollments at GCU increased in the high single digits, but this was offset by a higher number of graduates at our university partners than expected. GCU had a 19% increase in working adult graduates year-over-year, which was higher than expected. Our occupational therapy university partner had significantly more graduates than anticipated in the first quarter. As a reminder, the reported other university partner enrollments at March 31, 2021 do not include the off-campus GCU ABSN students. The reported year-over-year growth is being negatively impacted by the non-renewal of service agreements with a former university partner and the larger than expected number of OTA graduates. Excluding the March 31, 2020 enrollments from the former university partner, off-campus ABSN students grew 18.6% between years. We estimate the reduction in service revenue attributable to reduced tuition fees and ancillary revenue from our university partners resulting from COVID-19 was $4.5 million in the first quarter of 2021. Included in both our 8-K and the 10-Q filed today is a detailed explanation of the actual impacts on all of our university partners for the spring 2021 semester and our projected impacts for the summer 2021. Our effective tax rate for the first quarter of 2021 was 20.4% compared to 24.2% in the first quarter of 2020 and our guidance of 21.7%. The lower-than-expected effective tax rate was primarily due to higher than expected excess tax benefits resulting from a higher stock price at the time of the restricted stock vesting and stock option exercise. We estimate the lower effective tax rate increased our earnings per share by $0.03. We repurchased 567,255 shares of our common stock in the first quarter of 2021 at a cost of approximately $56.3 million and another 87,474 shares at a cost of $11.6 million subsequent to March 31, 2021. As of today, we have $180.4 million available under our share repurchase authorization. In March 2021, we entered into an accelerated repurchase plan with Morgan Stanley resulting in a payment of $35 million with initial common shares delivered totaling 275,889 shares, approximately 80% of those shares based on the fair market value. These shares, along with $28 million of the payment, are included in our first quarter share totals and available authorization balance. The remaining $7 million is included in the subsequent shares repurchased; a settlement with Morgan Stanley occurred on May 4, 2021. Turning to the balance sheet and cash flows, total unrestricted cash and short-term investments at March 31, 2021 were $262.3 million. Our credit facility has an available line of credit of $150 million as of March 31, 2021. GCE capital expenditures in the first quarter of 2021, including CapEx for new off-campus classrooms and laboratory sites, were approximately $8.9 million or 3.8% of net revenue. We continue to anticipate CapEx for 2021 will be between $30 million and $35 million. It is our understanding that GCU continues to explore options to refinance part or all of the note outstanding. Based on conversations with the university, if the university completes a refinancing of the note, it will most likely not be completed until the fourth quarter of 2021. Again, there is no assurance that a refinance will occur in 2021. The university has informed us that they will again request to borrow money near the end of the second quarter of 2021 for short-term cash flow needs and that the amount borrowed will be repaid in July 2021. Lastly, I would like to provide color on the guidance we have provided for the rest of 2021. The guidance that we have provided continues to be non-GAAP as adjusted, net income and as adjusted diluted income per share as we exclude the amortization of acquired intangibles. As Brian discussed earlier, and we have discussed previously, the last nine and a half months of 2020 was the perfect storm for GCU online. Driven by the COVID-19 pandemic and the significant operational and technology advantages that GCE believes it has against its competition, as well as the growing GCU brand at an affordable price point, GCU online saw enrollments that significantly exceeded our expectations. The higher than expected enrollments were partially due to a surge in new enrollments, especially in the second quarter of last year, when we saw a year-over-year increase of almost 20%. This higher than expected new enrollment growth continued through March of 2021, one year after the acceleration began. As Brian mentioned, new online starts were up in the high single digits in the first quarter on a year-over-year basis, which continued to be higher than our long-term target. In addition, during the past 12 months, we have seen a significant reduction in students taking time off, which has resulted in higher revenue per student and higher total enrollment. Although all of this is extremely positive, it has made forecasting this year very difficult. Historically, online enrollments and revenue have been fairly predictable, which has helped us beat and raise expectations for 13 straight years. Our historical experience helps us predict the number of students that will start each month, the number of students that will graduate based on their current progression, and the number of students in light. The unpredictable timing of reopening schools, hospitals, and businesses has made forecasting this year harder than any other year. While we had planned an increase in graduations and a decrease in reentrants as a percentage of total enrollment, actual graduations are exceeding our reforecast and reenters are trending much lower than our forecasts. This has been offset by the continued higher revenue per student and better than expected new enrollments in the first quarter. Since we are now over 12 months since these trends began, we believe there is limited ability to make up for higher than expected graduations and lower reenters as these current trends continue with higher than forecasted starts and revenue per student, especially given the fact that many major markets, schools, hospitals, and businesses are just starting to return to pre-COVID normal much later than we had hoped. We planned on new starts being down in the second quarter, as this quarter is typically not a back-to-school time for adult students, except for last year, but we are concerned new starts will be down year-over-year greater than we expect in the second quarter. We are still hopeful things will return to our long-term target growth rate in the third quarter for the reasons Brian cited earlier. Again, we do not believe this is a long-term fundamental change in our business but rather a short-term issue with difficult comparisons impacted by COVID-19 that will eventually smooth out. The ground enrollment growth rate continues to be pressured by a significant decline year-over-year in professional studies students, working adults taking courses on-ground, primarily at GCU's traditional campus, as we have not had entry points for these potential students due to COVID-19, and many of these students have now graduated out of their programs. We are hopeful that new professional studies cohorts will start again beginning this fall. As it relates to GCE/Orbis; one, new off-campus classroom and laboratory sites opened in the spring. Two, additional sites will open in the summer of 2021, and we are hopeful to open three additional new sites in the second half of 2021. Two sites that we thought could potentially open in fall 2021 are more likely to open in spring 2022. On the expense side, we have not changed our expectations for the first nine months of 2021. We are starting to see the acceleration in expenses we anticipated would occur as travel and medical benefits have begun to return to normal. These expenses have been down significantly in comparison to historical amounts beginning nearly the end of the first quarter of 2020. We have slightly adjusted our expected effective tax rate, excluding potential contributions made in lieu of state income taxes, to 23.7% in Q2, 24.7% in Q3, and 24.0% in Q4. All remaining stock options were exercised during the first quarter of 2021, and the majority of the outstanding restricted stock vests in the first quarter of each year. Therefore, there will not be any excess tax benefits for the rest of the year. We have adjusted the weighted average shares outstanding amount to account for our best estimate of the stock that will be repurchased, but this does not take into account any shares that would be repurchased on a refinance by GCU. I will now turn the call over to the moderator so that we can answer questions.

Operator, Operator

[Operator Instructions] Your first question comes from the line of Jeff Meuler from Baird. Your line is open.

Jeff Meuler, Analyst

Yes, thank you. So on the weaker trends from a total enrollment and a new enrollment perspective in Q2, can you provide any quantification? I ask from the standpoint that the way you’re describing this situation sounds fairly material. But when I look at the revised 2021 guidance, I recognize there’s a reduction, but the magnitude of the change in revenue doesn’t seem all that material to me. So just any help you can provide there? Also, are there offsetting factors that we need to consider?

Dan Bachus, CFO

No, it is not hugely material, but obviously we take very seriously the guidance we provided. And in our 13 years, I can’t recall a single time we’ve added lower revenue. So it isn’t material, but it is lowering. I think all three things that we talked about, the new starts, the reentrants, and the graduates are all slightly greater as new starts are expected to be down in the second quarter, but the magnitude of the decline is slightly worse than we thought. The reentrants present an opportunity going forward and are trending less than we expected, while the graduations, as you mentioned, are higher than anticipated. Brian, anything to add to that?

Brian Mueller, CEO

Hey, Jeff, sounds like you have a brand-related question.

Jeff Meuler, Analyst

Yes, so I guess regarding the return to more normal growth, at least from a new starts perspective in the back half of the year, what gives you confidence in that? I think you said that you’re already starting to see some reopening; was that a specific reference to your recruiters being back in those environments or was that just a more general macro comment on the economy reopening?

Brian Mueller, CEO

Yes, I think we spend a lot less on advertising than a lot of our competition does on general media advertising. We have a relationship with over 8,000 high schools across the country, including 4,000 private and about 4,000 public, and those relationships produce a lot of win-win situations. Much of what we do with schools, hospitals, counseling centers, and businesses is built on providing these win-win circumstances, which haven’t been as open to us. However, we didn’t change our strategy knowing that the pandemic kept extending. We were worried that it would negatively impact us, but we didn’t pivot from our strategy just to recruit questionable students. We are very concerned about the quality of both our on-ground and online students. For instance, on-ground this fall, we’re extremely excited as the average incoming GPA of the next class will be almost 3.6. Our Honors College has grown to 2,700 students with average incoming GPAs over 4.0, and our online student body is approximately 50% graduate students. Those students with licensures in education, counseling, and nursing, as well as some in technology, have not had as much access to us, but they are now returning to work, adjusting to changes in their lives. This strategy made us a little more vulnerable than other institutions that rely solely on advertising and lead generation. That said, we are proud of our students' quality and the outcomes we produce. For example, we had incredible month-over-month, quarter-over-quarter retention numbers, which is a good sign. Our enrollment may be down, but if students are dropping out, that would be a serious issue. We have high-quality programs leading to advantageous occupational opportunities, and that’s why we believe this is a temporary setback with a positive long-term outlook.

Jeff Meuler, Analyst

Okay, that makes sense. Regarding Harding University, you went through it quickly; is it a signed contract or a letter of intent? Regarding the master’s aspect, is this broader than just healthcare? Can you relay any intermediate-term ambitions in terms of program numbers or student counts?

Brian Mueller, CEO

We’re excited about the Harding partnership, because number one, it is a signed contract. Number two, it includes several Orbis sites. Additionally, we are helping them with some of their master’s programs outside of the healthcare area, converting them for delivery online. We are thrilled because they are very eager to partner, which adds to our excitement. We’re not only working on a degree program but on other initiatives that they want to pursue. Thus, yes, it’s a signed contract, and we are moving forward.

Jeff Meuler, Analyst

Got it. Thank you.

Brian Mueller, CEO

Yes.

Operator, Operator

And your next question comes from the line of Brett Knoblauch from Berenberg Capital. Your line is open.

Brett Knoblauch, Analyst

Thanks for taking my question. Just on Orbis, when I look at it, the other enrollment growth was a bit lower than historical figures; was that largely due to the university that terminated a couple of those locations, or is there something else in play?

Dan Bachus, CFO

No, a couple of things are at play. First, GCUs offsite locations are not included in the other partner number, and that’s where a significant amount of their growth is coming from, as GCU opens offsite locations through the Orbis relationship. These are included in the GCU enrollment number. Second, as you suggest, the non-renewal of a contract means those enrollments are not in this fiscal year, which was not the case in the previous year. Lastly, our partner for occupational therapy had significant numbers of graduates in the first quarter. Thus, we observed a slight decline overall in the occupational therapy enrollment number—this was not necessarily due to new starts being below expectation for that program, but rather due to graduates outnumbering new starts. I mentioned during my remarks that when you strip out, when you add in GCUs Orbis students and remove the terminated contract students, ABSN, overall growth was in line with what we expected, showing an 18.6% year-over-year growth.

Brett Knoblauch, Analyst

Understood. One more follow-up on the new contract with Harding University. I haven’t heard of the university before. I just Googled it—5,000 students in Arkansas. Can you detail why you chose them and why you think that’s a good fit? How quickly do you foresee these master programs ramping up, and when do you expect this to start translating to revenues?

Dan Bachus, CFO

We found Harding to be an intriguing opportunity for our growth strategy. When we began our search for new markets, we assessed various regions, including Arkansas. While the cities in Arkansas may not seem large at first glance, the greater metro area offers substantial potential. Harding is very willing to adapt its curriculum for distance learning, and they have expressed enthusiasm about these programs while demonstrating significant quality. The leadership of Harding is also very proactive in exploring options, which places them in a favorable position for growth. Their strong denomination ties provide additional opportunities for expanded network connections. We perceive this as a promising experiment with potential pathways for further expansion, especially as we continue our collaborations. We are genuinely eager to solidify our partnership and achieve shared success.

Brett Knoblauch, Analyst

Understood. Thank you.

Operator, Operator

And our last question comes from the line of Greg Pendy from Sidoti. Your line is open.

Greg Pendy, Analyst

Hey, guys, thanks for taking my questions. In light of the guidance, I understand it was modestly adjusted for the forward basis; regarding new student starts, we’re hearing from many schools in this space that rely on the advertising and lead model claiming things are becoming increasingly competitive. I realize you have a different model for attracting students, but could this increasingly aggressive advertising landscape impact you going forward? How have you operated during times when competitors that rely on lead acquisition become more competitive? Is it a risk to you, or have you been relatively immune to this?

Dan Bachus, CFO

Well, we’ve – I’ve been saying for seven or eight years, in this online business, the conversion of campus-based programs to an online format is very competitive, and it’s the easiest business to get into because you convert some curriculum, put some advertising out, collect leads, and convert them. It’s easy to enter but also crowded and competitive. Looking back at conversion rates, comparing past years up until today, it still remains efficient, but conversion effectiveness isn’t what it was 10 or 12 years ago. While we still engage in this model, much of our focus is on branding and leveraging relationships we have established over time to attract students. Through our partnerships, we have seen much higher quality students, resulting in improved graduation rates and lower default rates. Our average student debt remains significantly lower than that of state universities. Yes, the market is crowded, and others are entering the advertising arena; however, we remain confident in our efficient model that balances our advertising with partnership cultivation. Therefore, while the competitive landscape is challenging, we’re confident in our ability to continue achieving growth. We have reached the end of our first quarter conference call. We appreciate your time and interest in Grand Canyon Education. If you still have questions, please contact me, Dan Bachus. Thank you very much.

Operator, Operator

And this concludes today’s conference. Thank you for your participation. You may now disconnect.